Bidding at the Facebook Ad Auction: What You Need To Know

So you have yourself a fancy new Facebook page for your enterprising new business. You decided to hire some content creators who curated top-notch content, which pertains to your business and targets your specific target audience. Now you have decided to promote your original content on Facebook through advertisements. You created a Facebook ad for your content and what did you find? The Facebook ad auction. So the first question you should be asking yourself is “What is that?” and how do you make use of it?

Well, the answer to your first question is simple enough. The Facebook ad auction is literally an auction, wherein it involves numerous advertisers bidding for space on the consumer’s newsfeed. However, these auctions are not exactly like the ones you may have been accustomed to seeing on numerous television shows and movies, where rare antiquities are on sale for aristocrats to purchase and decorate their homes with. Rather, these auctions involve numerous advertisers bidding for space on the newsfeed of the consumer and these auctions are influenced by a variety of factors, other than who has the highest bid, that determines whether or not your ad makes it to your intended consumer.

When Facebook holds an ad auction, it takes various factors into account. These factors include:

• Your bid amount
• The relevance and quality of your ad
• Estimated Action rates

To ensure that your advertisement reaches your consumer, you need to make sure that your ad is firing off on all cylinders. Any one factor that is lacking could be the difference between winning and losing a Facebook auction.

What this can mean is that an ad with a low bid amount, but a high quality and relevance, can be shown instead of an ad that has a high bid amount, with comparatively lower quality and relevance.

However, Facebook recommends that you maximise your efforts on all three factors; which means placing high bids and creating ads that are engaging and relevant to your target audience; as this gives you the greatest chance to be featured on your desired ad-space.

So let’s take a closer look at the factors which dictate whether or not your ad will be seen by consumers.

• Bid amount

First up is the amount you choose to bid. You shouldn’t be worried about bidding too much as Facebook says that it will always charge you the minimum amount required to complete the bid. So consider bidding how much you think your ad is really worth.

Moreover, you should be cautious when bidding an underwhelming amount as it may result in losing the ad auction.

• Quality and Relevance of your ad

Facebook follows a practice of standardization of all of the above factors when it assigns ad placements. If even one factor is lacking, it could mean your ad loses out to its competition. So one of the most important factors you should pay attention to is the quality of your ad; is it engaging or has it received a lot of negative feedback, and its relevance to your target audience are all things you should be paying attention to.

• Estimated Action Rates

Basically, estimated action rates represent how likely Facebook thinks a person will perform a given action. If the Facebook algorithm determines that the number of actions consumers will take on your ad will be high when compared to an ad with greater relevance but a lesser chance of action, your ad will win the auction.

Different types of bidding on Facebook:

Here, we are going to help you understand the various kinds of bidding strategy that you can make use of depending on what your objective is; whether it is maximizing conversions, impressions etc.

CPM, CPC, oCPM, and CPA. These are the various types of bidding strategies available for use on Facebook’s ad platform. Let’s break down what each of these strategies corresponds to and how you can make the most out of them.

First, you need to decide what the target of your new ad campaign will be. Is your focus more on increasing the awareness of your brand? Or are you more concerned with amplifying your ROI by giving a greater focus to conversions?

Once you have decided the major focus of your campaign, it is time to choose the most effective strategy which corresponds to your objectives.

• CPM (Cost per Impressions)

Choose this option if you are more worried about increasing your brand awareness as you can pay a fixed price for impressions, which are the best way to reach a large number of people.

However, you should be careful as this does not let you optimise for conversions; Facebook only charges you for showing the ads to your target audience, so you should be certain that your target audience will commit to actions when they see your ad.

Due to this, this strategy should be reserved for brand awareness.

• CPC (Cost Per Clicks)

Make use of this strategy if you want your audience to click on your ads. What this means is that you only pay for your ads when somebody clicks on them. Your ad could be shown thousands of times but you will not be charged unless it is clicked on. Although, if your ads have been shown numerous times, but are not generating clicks then Facebook may stop delivering them all-together in favor of a cheaper ad with a greater CTR (Click Through Rate).

So what can be derived from the above observation? Basically, you should focus on creating engaging and compelling ads that garner more clicks to drive the amount you pay per click down (CPC). This is advantageous to you, the advertiser, as Facebook makes the most revenue from ads with higher CTR. Hence, they will promote your ad more.

You should focus on CPC if your aim is to maximize conversions.

• oCPM (Optimised Cost Per Mile)

When you create a new ad campaign on Facebook, oCPM is the default bidding option that is selected. However, it has one major drawback; oCPM works particularly well for larger audiences. Now, this may not seem like a drawback at first, but it is if your target audience is not as large as you would like it to be.

You should know that when you select this option, Facebook handles the optimization of your campaign entirely. However, this may not necessarily work out in all cases.

• CPA (Cost Per Action)

Cost per action allows you to pay only when a consumer takes steps towards fulfilling an action because they saw your advertisement. This action could include signing up for a newsletter, installing an application or clicking on a link which redirects them to your website.

Changes to the Facebook Ad Platform:

As of February 2017, Facebook has incorporated slight changes into bidding strategies and the ad platform in general. The meat of these changes comes in the form of being able to choose between a maximum and average bid when bidding for conversions and with Facebook making use of a method known as pacing, which essentially fine-tunes your bid amount to help you achieve the best ad results.

You can choose to set up a maximum bid if you wish to maximize your profits and get the highest number of leads, at a low cost. Whereas, you can choose to set up an average bid if you wish to increase your ad delivery rate, alongside maximizing conversions.

Facebook Tools for the Auction:

Facebook provides advertisers with a set of built-in tools which help improve their delivery results alongside giving them an enhanced look at how their ads are performing on Facebook.  These tools include:

• Delivery Insights which provides a greater number of metrics about your ad campaigns.
• Estimated Daily Results which tells you how bidding amount and the budget has an effect on video views and conversions.
• Conversion Optimization to serve ads to the people most likely to convert.
• Conversion Window for directing Facebook to look at conversions data within a conversion period.
• Post-Click Delivery to help deliver much more user-friendly ad experiences to people and drive real results for businesses.

Final Thoughts:

It is important to realize that at the core of all of the above ideas, the Facebook ad auction is still just an auction which is greatly influenced by numerous factors such as the amount you choose to bid, the relevance of your advertisement, and the estimated action rates determined by the Facebook algorithm.

Do you need help running a successful advertising campaign on Facebook? Are you perplexed by the intricacies of the Facebook ad platform? Drop a comment below or get in touch with us at contact@mwmstudioz.com.